Markets unPACKed: Wide Wonderful World of Wheat

Wide Wonderful World of Wheat


Chicago grain and oilseed markets have trended steady to lower over the last several weeks, ahead of, among other things, row crop harvest in the United States.

As we head into harvest for these markets, one of the more intriguing angles we’ve seen play out is in global wheat markets. Several newsworthy stories have been developing across the globe, which have recently led to some interesting price action.

The first of these came from Canada, estimated to be the third-largest national exporter of wheat globally this year. On Sept. 8, Stats Canada released their wheat stocks estimates for the country; the cuts were not as large as many in the trade had estimated. All wheat stocks were estimated (back to July 31 at 5.7MMT, versus expectations of 4.8MMT.

Elsewhere, in Russia, the export tax regime implemented to contain inflation has continued to sow confusion on export markets. Expectations for Russian exports have softened due in part to confusion over the tax liability exporters might incur from the scheme. This has buoyed the price somewhat of U.S. wheat markets in Chicago.

With that said, in September, December Chicago Wheat futures have lost roughly 30c as of this writing (approximately Sept. 20). The main reasons, we conclude, are continued fund selling, flipping to a net short as of last Friday’s CFTC report – and in a similar vein, macro pressure from outside markets pushing these markets down further.

Corn’s impact on price as a fellow feedstock has also been pressuring wheat, whereas a global concern over milling wheat availability has led to the Kansas City contract trading at a premium to Chicago, we’ve seen price action look similar day-by-day to corn despite the dearth of milling-quality wheat.

For that reason, as we head into corn harvest throughout the United States, we could see continued pressure on Chicago wheat markets. We are positioning ourselves to the short side, despite global milling wheat concerns and concerns over Russia’s export tax regime.


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